Islamabad/London
CNN
—
Muhammad Radakat, a 27-year-old vegetable shop, is worried. He didn’t know how much the onions would cost next week. Let alone the oil he needs to warm his home and warm his family.
“What we’ve been told by the government is that things are going to get worse,” Radaqat told CNN.
His anxiety reflects the mood of the country rushing to avert economic collapse. Facing US shortages Dollar Pakistan has enough foreign currency reserves to pay for three weeks of imports.
Thousands of shipping containers piled up at the port. And the costs of necessities such as food and energy are skyrocketing. Long lines are forming at gas stations as prices swing wild in the country of 220 million.
g There was a nationwide power outage last month. causing people to panic even more It brought Pakistan to a halt. causing the people to drown in darkness closed transport network and forcing hospitals to rely on back-up generators Officials have yet to determine the cause of the outage.
Pressure is growing on Prime Minister Shehbaz Sharif’s government to unlock billions of dollars in emergency financing from the International Monetary Fund. which has sent a delegation to the country this week for talks.
The value of the Pakistani rupee recently plummeted. to a new low against the US dollar. After the authorities relaxed currency controls to meet the IMF’s lending conditions, the government resisted changes requested by the IMF, such as easing fuel subsidies. because it will cause fresh prices to rise in the short term
“We need to reach an IMF agreement as soon as possible so that we can save the boats,” said Maha Rehman, an economist and former chief analyst at the Center for Economic Research in Pakistan.
Pakistan is experiencing what economists call a balance of payments crisis. The country spends more on trade than it imports. This caused a decrease in foreign currency stocks and counterbalanced the rupee. These dynamics cause interest payments on debt from foreign lenders. more expensive and pushing up the cost of importing goods This caused a greater withdrawal of the reserve, which included misery.
The country is fighting rampant price increases. The country’s central bank raised its key interest rate to 17% to bring down its annual consumer inflation rate of nearly 28%.
thin The issue the country faces is unique to Pakistan, said Tahir Abbas, head of investment research at Arif Habib, the country’s largest brokerage. Political instability and attempts to prop up its currency have weighed on investment and exports.
Last summer’s historic flooding also led to massive billing for restoration and rescue. which increases the burden on the government budget The World Bank estimates that at least $16 billion is needed to deal with damage and losses.
But global factors made the situation worse. The economic slowdown has hurt demand for Pakistani exports, while The rapid appreciation of the US dollar Last year put pressure on countries that import large amounts of food and fuel. The prices of these commodities have already skyrocketed due to the pandemic and the Russian war in Ukraine. causing the need to invest more money
The IMF has repeatedly warned that this could put pressure on the fragile economy. While it is expected that emerging markets and developing countries will see a slight increase in growth this year as the dollar weakens. At the highest level, global inflation fell. And China’s reopening spurred demand. The ability to manage debt remains an issue.
It estimates this week that 15% of low-income countries are already in debt, while 45% are at high risk of struggling to meet their obligations. The other 25% of emerging markets are also at high risk. Tunisia, Egypt and Ghana have all requested billions of dollars in aid from the IMF in recent months.
“The combination of high debt levels from the pandemic reduced growth and higher borrowing costs exacerbating these economic vulnerabilities. This is especially true for countries with short-term dollar-denominated financial needs,” the IMF noted in this week’s World Economic Outlook.
For Pakistan to avoid a debt default, negotiations with the IMF to restart the stalled aid program must be successful. According to investors and economists, the IMF delegation arrived on Tuesday and is scheduled to stay until Feb. 9.
“The availability of the IMF loan is important,” said Ammar Habib Khan, senior expatriate at the Atlantic Council.
But Farooq Tirmizi, CEO of Elphinstone, a Pakistani investor-focused startup, said: Although the IMF project resumed But it can’t solve all problems. Because the main issue that causes problems in Pakistan is “It’s not about the economy. it is a matter of politics, with a government that does not tolerate structural change.”
Pakistan’s economic crisis was at the center of a political showdown between Sharif and his predecessor Imran Khan last year. was cut off by a no-confidence vote in april After Sharif accused him of mismanaging the economy
The situation has remained turbulent since then. Pakistan passed three finance ministers in less than a year. The last two are part of the current government. This raises the question of whether Sharif can hold power. The country is expected to hold general elections this summer.
Chaos comes as Pakistan faces a new wave of attacks by militant groups. earlier this week A suicide bomber destroyed a mosque in Peshawar. Killed at least 100 people.It was one of the deadliest attacks in the country in years.
People have suffered in the meantime. Farmers who lost cotton, date palm, sugar and rice crops from the floods still need help. The World Bank estimated in October that as many as nine million. Pakistanis could be relegated to poverty without “Decisive relief and recovery efforts to help the poor”
High inflation is only adding to the pain for households struggling to make ends meet. Food prices in January rose 43% year-on-year. According to information published this week
Recently, attention has focused on a man in the southern province of Sindh who died in a scramble for bags of flour given to him by local officials. He was mauled to death by the crowd.
